That's backward to the title of the old western movie, but it seems to describe
the corn and soybean market situation following the January USDA reports.

The "ugly" is market price action in the last week. As of
Thursday (01-18-01), March corn futures price had declined eleven cents in just over a
week and March soybeans were twenty-four cents lower. Central MO cash corn bids ranged
$1.85 to $1.91 (Thursday). Soybean basis, while varying considerably, remains very weak.
Soybean cash bids at several Central MO locations ranged $4.30 to $4.33--that's ugly!

The "bad" is some of the disappointing supply and demand news in the
reports. The bad news was different for corn and soybeans. For corn the bad news
was demand. USDA lowered projections for both domestic use and exports resulting from
larger than expected current supplies. These changes increase the projected carryover
supplies at market year-end. The bad news for soybeans was supply. 2000 production was
only reduced 7 million bushels, most expected a larger reduction. This small reduction
along with expectations for a large South American crop and an increased 2001 U.S. soybean
acreage suggests burdensome supplies.

The "good" is also supply and demand news in the reports. For
corn the best news appears to be on the supply side. The 2000 crop is no longer a record
as a result of a cut in the production estimate. In addition, a potential acreage shift
from corn to soybeans suggests the potential for lower production in 2001. Demand news
wasn't all bad either. Corn use, while lowered, is still expected to be a record. Soybean
demand is also good news with expected record use building on last year's record use. In
addition, the improving supply and demand situation for wheat could provide grain market
support.

This past week, the "bad" overshadowed the "good" and resulted in
the "ugly." Reduced corn use in spite of less production and large soybean
supply regardless of record use sent prices lower. The good news may be more bullish for
corn. Reduced 2001 planting along with stronger than expected use or weather could quickly
change the supply and demand balance. The price outlook for soybeans is less optimistic.
However, continued strong soybean use suggests that this market could also react quickly
to surprises.

This mixture of both good and bad news creates market uncertainty and
considerable risk. Market strategies for both new crop and remaining old crop
supplies need to recognize these risks. The good news still provides hope for some price
rallies. While rallies are possible, current outlook for large supplies remains negative
and price goals should be realistic. It won't be easy, but a priority should be to avoid
"having to sell" at market lows. This may require relying on the market loan (if
the LDP hasn't already been claimed) or strategies that use a combination of cash sales
and options or futures transactions. Witnessing "ugly" price is one thing,
actually having to make sales at an "ugly" price is worse! --Melvin